Kesko's year 2007

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86 Kesko's year 2007 ceases. When determining the existence of control, the potential voting rights that are currently exercisable have been taken into account. The main subsidiaries are listed in Note 50. Internal shareholdings are eliminated by using the acquisition cost method. The cost of acquisition is determined on the basis of the fair value of the acquired assets as on the date of acquisition, the issued equity instruments and liabilities resulting from or assumed on the date of the exchange transaction, plus the direct expenses relating to the acquisition. The identifiable assets, liabilities and contingent liabilities of the acquiree are measured at the fair value on the date of acquisition, gross of minority interest. All intra-group transactions, receivables and payables, unrealised gains and internal distribution of profits are eliminated when preparing the consolidated financial statements. Unrealised losses are not eliminated, if the loss is due to the impairment of an asset. Minority interests in the net profit are disclosed in the income statement and the amount of equity attributable to minority interest is disclosed separately in the Group's equity in the balance sheet. Associates Associates are enterprises in which the Group owns 20–50% of the voting rights, or otherwise has significant influence, but not control. Associates are consolidated by using the equity method. A share of an associate's net profit for the period corresponding to the Group’s ownership interest is disclosed separately in the consolidated financial statements. The Group's share of an associate's post-acquisition net profit is added to the acquisition cost of the associate's shares in the consolidated balance sheet. Conversely, the Group’s share of an associate's post acquisition net losses is deducted from the acquisition cost of the shares. If the Group's share of an associate's losses is in excess of the carrying amount, the part in excess is not deducted unless the Group has undertaken to fulfil the associate's obligations. Unrealised gains between the Group and associates are eliminated in proportion to the Group's ownership interest. Dividends received from associates are deducted from the Group's profit and the cost of the shares. An investment in an associate includes the goodwill generated by the acquisition. Goodwill is not amortised. The main associates are listed in Note 50. Joint ventures Joint ventures are enterprises in which the Group and another party exercise joint control by virtue of contractual arrangements. The Group's interests in joint ventures are consolidated proportionally on a line-byline basis. The consolidated financial statements disclose the Group's share of a joint venture's assets, liabilities, income and expenses. At the end of the accounting period, the Group has no joint ventures. Mutual real estate companies In compliance with IAS 31, mutual real estate companies are consolidated as assets under joint control on a line-by-line basis in proportion to ownership. Foreign currency items The consolidated financial statements are presented in euros, which is both the functional currency of the Group’s parent company and the reporting currency. On initial recognition, the figures relating to the result and financial position of Group entities located outside the euro zone are recorded in the functional currency of their operating environment. Monetary foreign currency transactions are recorded in euros by applying the exchange rate at the date of the transaction. Foreign currency receivables and liabilities are translated into euros using the closing rate. Profits and losses from foreign currency transactions and from receivables and liabilities are recognised in the income statement with the exception of those loan exchange rate movements designated to provide a hedge against foreign net investments and regarded as effective. Foreign exchange gains and losses from operating activities are included in the respective items above operating profit. Gains and losses from forward exchange contracts and options used to hedge financial transactions, and from foreign currency loans are included in financial income and expenses. The income statements of Group entities operating outside the euro zone have been translated into euros at the average rate of the reporting period, and the balance sheets at the closing rate. The translation difference resulting from the use of different rates is recognised in equity. The translation differences arising from the elimination of the acquisition cost of subsidiaries outside the euro zone, and the hedging result of net investments made in them, are recognised in equity. In connection with the disposal of a subsidiary, currency translation differences are disclosed in the income statement as part of the gains or losses on the disposal. As of 1 January 2004, the goodwill arising from the acquisition of foreign units and the fair value adjustments of assets and liabilities made upon their acquisition have been treated as assets and liabilities of these foreign units and translated into euros at the closing rate. The goodwill and fair value adjustments of acquisitions made prior to 1 January 2004 have been recorded in euros. Financial assets As of 1 January 2005, the Group has applied IAS 32 Financial Instruments: Disclosure and Presentation, and IAS 39 Financial Instruments: Recognition and Measurement, as well as IFRS 7 Financial Instruments: Disclosures starting from 1 January 2007. The Group classifies financial assets in the following categories: 1) financial assets at fair value through profit or loss, 2) available-for-sale financial assets, and 3) loans and receivables. The classification of financial assets is determined on the basis of why they were originally acquired. Purchases and sales of financial assets are recognised using the ‘regular way’ method. Financial assets are classified as non-current assets if they have a maturity date greater than twelve months after the balance sheet date. If financial assets are going to be held for less than 12 months, they are classified as current assets. Financial assets at fair value through profit or loss are classified as current assets. Financial assets are derecognised when the contractual rights to the cash flow of the financial asset expire or have been transferred to another party, and when the risks and rewards of ownership flown from the Group. At each reporting date, the Group assesses whether there is any indication that a financial asset may be impaired. If any such indication exists, the recoverable amount of the asset is estimated. The recoverable amount is the fair value based on the market price or the present value of cash flows. An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount. The impairment loss is disclosed in the financial expenses of the income statement, net of interest income.
Year 2007 Divisions The Group Financial statements Further information 1) Financial assets at fair value through profit or loss All derivatives which do not qualify for hedge accounting in compliance with IAS 39 are classified as financial assets at fair value through profit or loss. Derivatives are carried at fair value using prices quoted in active markets. The results of derivatives hedging purchases and sales are recognised in other operating income or expenses. The results of derivatives used to hedge financial items are recognised in financial items, unless the derivative has been designated as a hedging instrument. The subcategory of financial assets at fair value through profit of loss in initial recognition includes investments in bond and special investment funds, as defined by the Group's treasury policy, as well as investments in other interest-bearing papers with over 3-month maturities. The interest income and fair value changes of these financial assets, as well as any commissions returned by funds are presented on a net basis in the income statement in the interest income of the category in question. 2) Available-for-sale financial assets Available-for-sale financial assets are assets designated as available for sale at the date of initial recognition. Available-for-sale financial assets are measured at fair value at the balance sheet date and their fair value changes are recognised in equity. The fair value of publicly quoted financial assets is determined based on their market value. Financial assets not quoted publicly are measured at cost if their fair values cannot be measured reliably. The dividends from equity investments included in available-for-sale financial assets are recognised in financial items in the income statement. The interest income from available-for-sale financial assets is recognised in the financial items of the relevant category. 3) Loans and receivables Loans and receivables are non-derivative assets with fixed or measurable payments. The Group's loans and receivables include trade receivables. They are recognised at amortised cost using the effective interest method. Cash and cash equivalents Cash and cash equivalents are carried at cost in the balance sheet. Cash and cash equivalents include cash on hand and balances with banks. The cash and cash equivalents in the consolidated balance sheet also include amounts relating to the retail operations of division parent companies, used as cash floats in stores, or amounts being transferred to the respective companies. Financial liabilities Financial liabilities have initially been recognised at fair value, net of transaction costs. In the financial statements, financial liabilities are measured at amortised cost using the effective interest rate method. The arrangement fees related to lines of credit are amortised over the validity period of the credit. Financial liabilities having a maturity period of over 12 months after the balance sheet date are classified as non-current liabilities. Those having a maturity period of less than 12 months after the balance sheet date are classified as current liabilities. Derivative financial instruments and hedge accounting When acquired, derivative financial instruments are carried at fair value and subsequently measured at fair value at the balance sheet date. The changes in the fair value of derivatives that do not fulfil the hedge accounting requirements of IAS 39 are disclosed in the income state- 87 ment. The results of instruments hedging commercial currency risks are recognised in other operating income or expenses. The portion of derivatives hedging financial transactions to be recognised in the income statement is included in financial items. When entered into, derivative contracts are treated either as fair value hedges of receivables or liabilities, or in the case of currency risk, as cash flow hedges, as hedges of net investments in a foreign entity, or as derivative contracts that do not meet the hedge accounting criteria. When a hedging arrangement is entered into, the relationship between the item being hedged and the hedging instrument, as well as the objectives of the Group's risk management are documented. The effectiveness of the hedging relationship is tested regularly and the effective portion is recognised, against the change in the fair value of the hedged item, in translation differences in equity, or in the revaluation surplus. The ineffective portion is recognised in financial items or other operating income and expenses. The effective portion of the fair value change of instruments hedging cash flow, such as a long-term credit facility, is recognised in the equity hedging reserve. The value change of currency derivative instruments relating to the credit facility is recognised in the loan account, and the fair value changes of interest rate derivative instruments in other non-interest-bearing debt and receivables. Hedge accounting is discontinued when the hedging instrument expires or is sold, the contract is terminated or exercised. Any cumulative gain or loss existing in equity remains in equity until the forecast transaction has occurred. Measurement principles The fair value of forward rate agreements is determined by reference to the market price of the balance sheet date. The fair value of interest rate swaps is calculated on the basis of the present value of future cash flows using the market prices at the balance sheet date. The fair value of forward exchanges is determined by measuring the forward contracts at the forward rate of the balance sheet date. Currency options are measured by using the counterparty's price quotation, but the Group verifies the price with the help of the Black-Scholes method. Electricity and grain derivatives are measured at fair value using the market quotations of the balance sheet date. Hedging a net investment in a foreign entity The Group applies hedge accounting in accordance with IAS 39 to hedge foreign currency net investments in foreign units. Forward exchanges or foreign currency loans are used as hedging instruments. Spot price changes in forward exchanges are recognised as translation differences under equity, and changes in the interest rate difference are recognised as income under financial items. The exchange differences of foreign currency loans are stated as translation differences under equity. When a foreign entity is disposed of or wound up, the accumulated gains or losses from hedging instruments are recognised in profit or loss. Embedded derivatives The Group has prepared method descriptions to identify embedded derivatives and applies fair value measurement. Fair value is determined using the market prices of the measurement date and the value change is recognised in the income statement.
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Kesko’s year 2007
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Year 2007 Contents Divisions The Gr
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Year 2007 the best offers Divisions
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Year 2007 Financial highlights for
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Year 2007 list. In 2008, we intend
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Year 2007 Competitive environment F
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Year 2007 Divisions The Group Finan
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Year 2007 Kesko Food Divisions The
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Year 2007 Health-promoting and resp
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Year 2007 Rautakesko Divisions The
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Year 2007 VV-Auto VV-Auto imports a
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Year 2007 Heini a suitable price in
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Year 2007 Kesko Agro Kesko Agro’s
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Year 2007 Kesko Agro Divisions The
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Year 2007 Other operating activitie
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Page 69 and 70: Year 2007 Maarit Näkyvä b. 1953,
Page 71 and 72: Year 2007 Pekka Lahti b. 1955, M.Sc
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Page 97 and 98: Year 2007 Note 3 Divisions The Grou
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Page 103 and 104: Year 2007 Note 12 Tangible assets
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Page 107 and 108: Year 2007 Changes in deferred taxes
Page 109 and 110: Year 2007 Note 19 Inventories Divis
Page 111 and 112: Year 2007 Note 26 Changes in share
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Page 117 and 118: Year 2007 Note 35 Contingent liabil
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Year 2007 Shares and shareholders D
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Year 2007 Key indicators Share pric
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Year 2007 Share capital and shares
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Year 2007 Divisions The Group Infor
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Year 2007 Latvia Rautakesko A/S Ren
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Year 2007 Logistics is a process in
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Design and layout: Incognito Photos
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Kesko's year 2007

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